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Fairfield resident Rishi Malik pleaded guilty to one count of conspiracy to commit wire fraud and to violate the Contraband Cigarette Trafficking Act and one count of wire fraud.
Malik and a partner opened and ran Connecticut Discounts LLC, a tobacco wholesale business in Bridgeport.
Through that company, Malik obtained tobacco products from out-of-state suppliers and distributed the products to a network of clients who offered tobacco products for retail sale.
According to court filings:
While operating Connecticut Discounts, Malik underreported the amount of tobacco he was importing into the state to the Connecticut Department of Revenue Services.
In June 2012, Malik sold Connecticut Discounts to Pavan Vaswani, who continued the tobacco wholesale business under the name KDV Discounts. From approximately June 2012 through April 2017, Malik frequently assisted Vaswani in importing tobacco products from out-of-state suppliers.
On occasion, Malik drove to Pennsylvania to pick up products that he delivered to KDV in Connecticut. He also participated in making orders, and sometimes delivered payments in cash.
Between January 2013 and April 2017, KDV acquired nearly $12 million in tobacco products, primarily cigars, from suppliers in Pennsylvania, and distributed these products to hundreds of customers in Connecticut that stocked tobacco products for retail sale.
On tax forms that Vaswani filed with the Department of Revenue Services on behalf of KDV, the amounts reported were a small fraction of what KDV actually acquired.
Through this scheme, Vaswani failed to report approximately $5,821,057 in tax to the State of Connecticut.
In 2014, Malik registered Discount Deals, LLC, with an address in Sciota, Pennsylvania. Malik held out Discount Deals to be a tobacco distribution business. However, the unit he rented was not a space for a legitimate tobacco business and was maintained to create the appearance that Discount Deals was a legitimate Pennsylvania-based tobacco wholesaler.
Between 2014 and April last year, to subvert other federal regulations regarding interstate transport of smokeless tobacco, Malik used Discount Deals to purchase more than $1.1 million in smokeless tobacco products from Pennsylvania suppliers, many of which was sent to KDV for distribution in Connecticut.
Discount Deals made no tax payments to the State of Connecticut between 2014 and 2017, and approximately $400,000 in smokeless tobacco tax was not reported to Connecticut or other states.
Malik and Vaswani were arrested on Jan. 11.
Malik, 46, faces up to 20 years in prison when he is sentenced on Jan. 23 next year. He and Vaswani - who pleaded guilty to the same charges - remain released on bonds pending their sentencings. He and Vaswani have also agreed to pay $5,821,057 in restitution.
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